Reuters: Private Equity: UPDATE 2-GeoEye offers to buy DigitalGlobe for $792 mln

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UPDATE 2-GeoEye offers to buy DigitalGlobe for $792 mln May 4th 2012, 11:20 Fri May 4, 2012 7:20am EDT * Deal for $17.00/shr * Premium of 26 pct * DigitalGlobe shares up 25 pct premarket May 4 (Reuters) - Satellite imagery company GeoEye Inc offered to buy rival DigitalGlobe Inc for $792 million in a cash-and-stock deal that would create the world's largest fleet of commercial imagery satellites. The proposal comes at a time when both the companies are under pressure to make up for a possible loss of revenue from defense spending cuts by the U.S. government - their largest customer. The Obama administration proposed to cut funds for commercial imagery contracts to $250 million from $540 million as part of its fiscal 2013 budget proposals, industry sources told Reuters last month. Moody's had revised GeoeEye's outlook to negative in February on those concerns. A combined company will be better placed to provide the U.S. government with geospatial intelligence, in the face of the defense spending cuts and intensifying international competition, GeoEye CEO Matt O'Connell said in a statement. GeoEye offered to pay $17.00 per DigitalGlobe share - a 26 premium to the stock's Thursday close. DigitalGlobe shareholders will get $8.50 per share in cash and 0.3537 shares of GeoEye stock for each share held. The two companies have been discussing a possible combination for the last few months, a public letter from GeoEye to DigitalGlobe showed. GeoEye said its board can consider restructuring the proposal to make it an all-cash offer, or to reduce the cash component. Its largest shareholder Cerberus Capital Management is prepared to contribute substantial capital in support of the transaction, GeoEye said. The company had cash and cash equivalents of $172.0 million, as of March 31. Goldman, Sachs & Company, Convergence Advisors LLC and Latham & Watkins LLP are advising GeoEye, which is valued at $547 million. DigitalGlobe, valued at $630 million, posted 2011 annual revenue of $339.5 million. It owns and operates three earth-imaging satellites, while GeoEye has two. GeoEye said the transaction will not involve undue delay and that it had already undertaken a preliminary review of antitrust and international competition issues. GeoEye shares have lost 31 percent value in the last one year, while the DigitalGlobe stock has nearly halved in value. DigitalGlobe shares rose almost 26 percent to $16.99 in premarket trading on Friday. They closed at $13.52 on Thursday on the New York Stock Exchange. Link this Share this Digg this Email Reprints

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